The Peoples Republic of China has successfully borrowed more than$1 billion in Europe in the past few weeks, $500 million in a precedent-setting loan from an Arab consortium that granted China extraordinarily favorable terms.

These loans are the first since China adopted a more open stance to the West-including a willingness to borrow money to finance imports.

The banks involved have been tight-lipped on the terms. But the Arab group, Union des Banques Arabes et Francaises (UBAF), put up its money for an average of 3.5 years. The interest rate is 1/2 point over the London inter-bank rate (LIBOR), with no agency, management or other fees. The loan, meeting China's preference, is in dollars.

LIBOR stands for the London Inter-Bank Offering Rate, a benchmark for medium- and long-term loans in the Euro-dollar market. It is a fluctuating money market interest rate, at the moment slightly under 11 per cent for six months.

In addition, China was not required by the Arab group to waive its sovereign immunities, which means that if there should ever be a dispute over repayment, the lenders would not have recourse to arbitration.

"The Chinese are tough bargainers," according to a European banker. "The terms they got from the Arabs mean that British, German, American or Japanese banks will now be under pressure to come up with comparably favorable terms."

Other loans, totaling $575 million, all of it for 5 years, followed quickly. These banks, mostly London-based, have refused to make public the terms, but sources here and in New York think that the formula of LIBOR plus 1/2 percent has prevailed. Whether there are fees or other conditions is not known.

The first loan to follow the UBAF commitment was $175 million through a London consortium headed by the Midland and International Banks, Ltd. Midland Bank of London has a major interest in this group. Other participants are the Standard Chartered Bank of London, the Toronto Dominion Bank, and the Commercial Bank of Australia.

Following that, $400 million was advanced in equal shares by Lloyds International Bank, the National Westminster Bank, the Standard Chartered Bank, and the Midland Bank.

The Chinese approach to the Paris-based Arab group resulted from China's inability to get the kind of loan terms it wanted from Japan. Reportedly, Japanese banks had asked for 5/8 of a point ove LIBOR for a $2 billion, 5-year loan, and 1/2 point over LIBOR for a

billion, six-month advance.

"The Chinese decided on the terms they wanted and went to the Arab group, in the expectation that they might get it," said a source in close touch with Peking officials. Negotiations were carried on quietly in Peking and Paris.

The loan from the Arabs will be completed within 90 days. The maturity averages 3.5 years, the bulk of it running to 3 3/4 years, with a "bullet" repayment due at the end of the loan period. The loan is not tied to imports from any nation. In effect, it will help China meet its costs for imports across the board.

Officials here speculated that the relatively easy terms offered by the Arab group were designed to get a foothold for future dealings with China.They noted with interest, as well, that there is no Saudi Arabian money involved. The participants are the Arab African Bank, the Arab Bank Ltd., the Libyan Aran Foreign Bank, the European Arab Bank and The Ahli Bank of Kuwait. There is no French money in the consortium, despite the name.

European and American bankers confirmed, from their viewpoint, that China had moderated its long-term modernization plans to conform to more realistic expectations.

One well-posted executive said China could not absorb more than $7 billion to $10 billion worth of new projects annually of which 50 to 60 percent would be financed internally. Stretching the arithmetic as far as possible, he said that not more than $5 billion a year should represent external financing.